1. What is the I Bond Composite Rate?

The I Bond composite rate is the total earnings rate for Series I savings bonds, combining a fixed rate that remains constant for the bond's life with an inflation rate that adjusts semiannually based on the Consumer Price Index.

2. How Does the Calculator Work?

The calculator uses the I Bond composite rate formula:

Where:

• \( Composite \) — Total composite rate (decimal)
• \( fixed \) — Fixed rate component (decimal)
• \( inflation \) — Inflation rate component (decimal)

Explanation: The formula combines the fixed rate with twice the inflation rate plus their product to calculate the total return on I Bonds.

3. Importance of I Bond Rate Calculation

Details: Accurate composite rate calculation helps investors understand their potential returns from I Bonds, which are popular for their inflation protection and tax advantages.

4. Using the Calculator

Tips: Enter both fixed and inflation rates as decimals (e.g., 0.025 for 2.5%). Rates must be non-negative values.

5. Frequently Asked Questions (FAQ)

Q1: What are I Bonds?
A: I Bonds are U.S. savings bonds that earn interest based on a combination of a fixed rate and an inflation-adjusted rate.

Q2: How often do I Bond rates change?
A: Fixed rates are set when bonds are purchased, while inflation rates adjust every six months based on CPI-U data.

Q3: What are typical I Bond rates?
A: Fixed rates typically range from 0% to 1-2%, while inflation rates vary with economic conditions.

Q4: Are I Bonds taxable?
A: I Bond interest is subject to federal income tax but exempt from state and local income taxes.

Q5: What are the holding requirements?
A: I Bonds must be held for at least one year, and redeeming within five years forfeits the last three months of interest.